9 5
4 DATE: June 16, 2025
TO: Mayor and Members of the City Council
President and Members of the Estero Municipal Improvement District (EMID) Board of Directors
VIA: Stefan Chatwin, City/District Manager
FROM: Diane Pitman, Administrative Services Director
DEPARTMENT: Administrative Services
SUBJECT: DECLARING THE ASSUMPTION OF ANY AND ALL WORKERS
COMPENSATION LIABILITIES AS A SELF-INSURED EMPLOYER
RECOMMENDATION
It is recommended that the City Council/EMID Board of Directors adopt the attached resolutions declaring the assumption of any and all workers’ compensation liabilities as a Self-Insured employer and authorize the City/District Manager, or their designee to execute any and all documents required to apply for a Certificate of Consent to Self- Insure.
EXECUTIVE SUMMARY
One of the steps necessary to transition out of the Cities Group Joint Powers Authority (JPA) and into a stand-alone, Self-Insured workers’ compensation program is to receive a Consent to Self-Insure Certificate from the Office of Self-Insurance Plans (OSIP) within the Department of Industrial Relations (DIR). A key component of this process is for Foster City to insure the payments of all workers’ compensation liabilities. The application for a Consent to Self-Insure requires a resolution approved by the City Council assuming any and all workers’ compensation liabilities. The attached Resolution complies with the guidelines set by OSIP.
9 5
4 BACKGROUND/ANALYSIS
Foster City joined Cities Group JPA in 1978 for the purpose of establishing, operating and maintaining a pooled self-insurance program for workers’ compensation and to provide third party administration for workers’ compensation claims. At the time the JPA was established, there were five cities (Atherton, Half Moon Bay, Brisbane, Hillsborough) in the JPA. The JPA pooled the resources of its member cities to maintain a self-insurance program and administer workers’ compensation claims. The JPA was governed by a Board comprised of a Board Member from each agency. Over the years, the JPA has continued, except that the Cities of San Carlos and Dublin have joined the JPA and the City of Brisbane is no longer a member.
After a year of reviewing the administration of Workers’ Compensation claims for Foster City, it was recommended that Foster City withdraw from the Cities Group and self- insure independently and hire an independent third-party administrator (TPA) to administer the claims. The new administrator will ensure that Human Resources staff are involved in the employee claims processing, that claims are approved or denied in a timely manner, employees receive medical care and treatment so that they can return to work, and that any claim litigation or settlements are handled by the City. Any settlements over $50,000 will be brought to the City Council for approval.
Staff provided Cities Group a withdrawal notice on November 14, 2024. According to the Cities Group by-laws, the withdrawal will become effective July 1, 2025. On June 10, 2025 the Cities Group Board approved a resolution that will transition all existing Foster City claims to the new third-party administrator, rather than leaving the existing claims with the JPA. By retaining Foster City’s claims, the City will have control over the administration of those claims.
As part of the transition process, staff met with the selected TPA, LWP Claims Solutions Inc., to determine what processes and procedures were necessary to become self-insured. One of the steps is to register with the State of California, DIR, OSIP office by applying for a Certificate of Consent to Self-Insure. The application requires a resolution approved by City Council that confirms the City’s intent to self-insure. The attached resolution conforms to the requirement of the OSIP office.
The Cities Group JPA retains reserves allocable to Foster City which will be returned to Foster City according to their by-laws which holds the reserves for a period of at least 5 years. However, at a recent JPA Board meeting, the Board voted to review the dissolution process of the JPA. If a dissolution does occur, any existing assets would likely be returned to the cities at the time of dissolution rather than under the by-laws process. The dissolution process will be monitored by staff to ensure Foster City assets are returned appropriately.
9 5
4 California Environmental Quality Act
The approval of the resolution declaring the assumption of any and all workers’ compensation liabilities as a Self-Insured employer is not subject to review under the California Environmental Quality Act (CEQA) pursuant to Public Resources Code Section 21000, et seq. and the CEQA Guidelines (14 Cal. Code Regs. §§ 15000 et. seq.), including without limitation, Public Resources Code section 21065 and California Code of Regulations 15378 as this is an administrative action and not a “project” that may cause a direct, or reasonably foreseeable indirect, physical change in the environment.
FISCAL IMPACT
The long-term fiscal impact of leaving Cities Group JPA is estimated to reduce costs to the City. For the FY 2025/2026, staff has created a Workers Compensation Internal Service Fund assuming the same cost as was budgeted in FY 2024/2025 under the JPA which is approximately $1.5 million. Any unspent funds will be retained in that internal service fund to build reserves for future claims. Any costs incurred in excess of the internal service fund appropriation would require a supplemental appropriation subject to City Council approval.
CITY COUNCIL VISION, MISSION, AND VALUE/PRIORITY AREA
Staff Empowerment and Operational Excellence
ATTACHMENTS:
Attachment 1 – City Resolution
Attachment 2 – EMID Resolution